Generic Advair will put the squeeze on GSK this year

GlaxoSmithKline has confirmed it will face a challenging 2019 as generics of its big-selling Advair drug finally reach the US, as it continues the transformation of its business.

The FDA approved the first direct rival to the asthma and chronic obstructive pulmonary disease (COPD) blockbuster last week, putting around $1 billion of Advair (salmeterol /fluticasone) sales at imminent threat of cheaper competition.

GSK has already been cutting the price of its brand to try to minimise the impact, but nevertheless said during its fourth-quarter results call that it expects profits could be hit by up to £800 million this year, with another dent from its $5.1 billion takeover of cancer company Tesaro.

It also thinks revenues for the year will show a "slight decline" while earnings will be down 5% to 9%, although analysts at Jefferies said this was a little more optimistic than they expected.

The delay in Advair competition meant GSK reported a solid 2018, however, with rocketing sales of shingles vaccine Shingrix and another healthy performance for HIV unit ViiV helping the company to a 5% increase in revenues to £30.8bn at constant exchange rates. The performance seemed to please investors too, with the company’s shares rising almost 2% after the figures were released.

Shingrix sales more than doubled last year to reach £784 million in its first full year on the market, despite some supply constraint, while HIV drugs advanced 9% to £4.7 billion, driven by ViiV’s dolutegravir franchise which grew 16% to £4.4 billion.

While Advair’s price cutting and competition pegged back GSK’s respiratory sales overall, there were some bright spots, including COPD triple therapy Trelegy which made £156 million in its first full year and should see another kick this year if it gets a green light in asthma.

"We expect the recently approved generic Advair to have minimal impact on this highly differentiated product, the first approved once daily single inhaler triple therapy for COPD," said GSK CEO Emma Walmsley on the firm’s results call.

Nucala (mepolizumab) for severe asthma also held up well despite the launch of rival therapies from Sanofi/Regeneron and AstraZeneca, rising 38% to £563 million, and the product could also get a lift from a new auto-injector formulation that has been filed in the US and Europe.

Walmsley also said that GSK will consider more acquisitions as it continues to rebuild its pipeline, adding to the Tesaro takeover and the $4.2 billion licensing deal for a Merck KGaA cancer immunotherapy earlier this week. Oncology is the main target, she told investors, and the Merck deal is a model for the type of transaction the company is looking for.

GSK now has 16 cancer drugs in the clinic with three pivotal study readouts before the end of the year, Walmsley added.

The revamp of the pipeline has continued with another eight projects shelved since GSK’s last R&D update in mid-2018, bringing the total number culled to more than 80 since 2017. However, the total number of clinical projects has swelled from 43 to 46 over the same period with "the quality of the portfolio…much improved," said Hal Barron, GSK’s new head of R&D.

The three drugs with pivotal trials due to readout this year are anti-BCMA antibody drug conjugate in fourth-line multiple myeloma, Tesaro’s PD-1 inhibitor TSR-042 in endometrial cancer, and Tesaro’s already-market PARP inhibitor Zejula (niraparib) as a frontline maintenance therapy in patients with ovarian cancer, he noted.

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